In Good Health?
Glass Companies Weigh in on the Impending Healthcare Actby Ellen Rogers

Nearly 1,200 miles separate Waite Park, Minn., from Syracuse, N.Y. Waite Park is a small, upper Midwest town with a population of about 6,700. Syracuse, home to more than 145,000, has been dubbed the economic and educational hub of Central New York. The day-to-day struggles for small towns may be unlike those of a larger city, but these two locations have at least one thing in common: they are both home to glass companies that have concerns about the pending Affordable Care Act.

Heartland Glass in Waite Park, Minn., is a contract glazing company with 22 employees; Syracuse Glass in Syracuse, a fabricator/distributor with 85 employees. Like so many others, both have been struggling these past years with the construction market being so hard hit. Now, despite the fact that business is slowly beginning to percolate, they find themselves faced with yet another challenge: increasing health care costs.

After years of debate it seems comprehensive health care reform—via President Obama’s Affordable Care Act—is set to go into effect January 1, 2014. What impact will this new plan, and healthcare in general, have on companies in the glass industry? While the plan details numerous provisions and the mandates are many, some of the biggest concerns simply fall back on the question of cost.

Market Exchanges
Bill Sullivan is the president and CEO of Heartland Glass Co. Inc. He sees the health care act as a good thing “because it is attempting to address the health care issues that this country faces.” But he is quick to add, “I don’t necessarily agree that the act is the best way to address those issues, however. I believe it is too complicated and will be hard to enforce.”

Sullivan says that as the plan has been explained to him, it seems as though there are a lot of unknowns, in particular, the Exchange Market being an option for some employers. Specifically called the “Affordable Insurance Exchanges,” these will be marketplaces that will allow individuals and small businesses to compare and choose private health plans. Each state will take the lead in designing its own menu of options.

“Those companies with fewer than 50 employees will be pooled into their own group and for us, we are on the high end of our insurance carrier’s premium level,” he says. “As it was explained to me, when you’re in this pool there will be those who had been paying at the high end and those at the low end and then they’re all grouped together for the average. So we’re expecting our premium to decrease once the legislation is enacted and in that case it would be good for us.”

He continues, “What gets messy is that each state can select to administer the Exchanges themselves, or they can elect to have the Federal Government administer or a combination of both. The State of Minnesota has elected to administer the program and it is ahead of the Federal program already and will be ready to go live when the time comes.”

Currently, Heartland Glass offers its employees insurance through a regional carrier and Sullivan says the company pays 75 percent of the employee and family costs of the premium.

“If a family of four has a premium of $1,000, we pay $750 and they pay $250,” says Sullivan. “We only offer health insurance; we do not offer dental, etc. We probably pay a little more than most employers in this area, from what I understand.”
He says, though, this is a rather new plan for his company, as it just began this past January.

“We were previously with Blue Cross/Blue Shield but we made the strategic move to this carrier,” he says. “When we switched we got a lower rate, but we are still at the highest tier as far as premiums. However, if we had stayed with Blue Cross/Blue Shield there were still a couple tiers above us and we were afraid they could kick us up a few notches once the health care act takes affect.”

He continues, “Because of our size, we don’t have the volume that larger employees have to maybe eliminate health insurance and pay the fine. Plus, morally, I couldn’t do that to our employees. We consider health care part of their compensation package and it’s the responsible thing to do to provide that to employees.”

Now, with January 1, 2014 only months away, Sullivan says he is making every effort he can to learn of what’s coming and to prepare for the new law.

“We’re trying to get educated as best we can so we can communicate the changes and options that will be available,” he says. “We’ve been attending health care seminars that are being put on by brokers to try and get the information we need to know about it as it becomes available.”

He adds, “This should be interesting when it all shakes out and from what I can tell there will need to be modifications for those scenarios that were not thought of before.”

The Bottom Line
For John Dwyer, president of Syracuse Glass Co., much of his concern about the upcoming law centers on cost.

“Our insurance broker is telling us to expect an 18-percent increase in premiums when our policy renews on December 1,” he says. “I don’t know what’s responsible for this, whether it’s the Affordable Healthcare Act or New York state. In New York employer-provided health insurance is already very expensive, and has been for years.” This, he says, is due to the broad, inclusive state mandates on what has to be covered.

According to Dwyer, when he first learned of the new legislation he didn’t expect his company would be affected, since so much is included in the new plan and in New York, he points out, health insurance coverage is already significant.

“I really thought in a lot of states where there are not a lot of mandates the costs would go up, but I didn’t think it would in New York, as well,” he says. “We will try to push back on this increase, but there’s actually only one insurance company that will write policies in our area, the local Blue Cross/Blue Shield,” he says.

The challenge, he says, is that coverage continues to get more and more expensive.

“We’ve been fortunate to be able to keep paying these huge increases,” he says. “Business is improving and we’ll see what next year brings.”

Dwyer says, though, they have had to pass on some cost to employees.

“We pay 85 percent of the employee cost and 75 percent of dependent coverage. We used to pay it all, but we’re limited as to how much we can do that,” says Dwyer, who explains the company actually looks to its employees for input on the direction to go in terms of health coverage and the increasing costs.

“Each time we’re facing a big increase we will survey our employees and ask them what they’d want to do: cut back and have a co-pay or pass on more cost in terms of say a weekly contribution, i.e., taking [a portion] out of their checks, etc.,” says Dwyer. “And usually they want us to take out a little more.”

It can also be somewhat of a challenge to prepare for a change such as this.

“Business is better [this year compared to] last year. Our sales are up, but our profits have not increased like the sales have. So, we’ll keep monitoring our projected increase, keep working on our efficiency, and we’ll do a budget for next year later on this year and that will help us determine what we will have to do,” says Dwyer. “Financially, it looks like we would be better off paying the tax or penalty and getting out of the health insurance business entirely, but we’ve got a long tradition of paying for great coverage for our employees and their families here, and that’s not the direction we want to go.”

Dwyer continues, “This almost reminds me a little of the changes made 30 years ago with pension plans. Everyone started offering a 401k because pensions were so expensive and it became socially acceptable to no longer offer pensions,” he says. “And now most companies don’t offer them. With this [health care legislation] being so complicated and expensive and if enough employers say they are not going to offer health care it could become really catastrophic. If you just look at the money side you can see where there could be an advantage [to not offering it], but you can’t do that. It’s not socially acceptable. But, the more expensive and complicated, the potential [to not offer] it gets bigger and bigger, and I would hate to see that happen.”

Moral Responsibility
Costs are certainly a big deal for many when it comes to health care, but that wasn’t the reason Gilkey Windows chose to cease its offerings. Visit our sister magazine DWM online at www.dwmmag.com and read the June issue to find out why Gilkey decided to pay the penalty and forego offering health insurance to its employees.

Small Business News: Tax Breaks Go Largely Unclaimed
While employers with fewer than 50 employees are not required to offer health insurance under the new health care law, the government does offer tax credits, in the hopes of enticing more small employers to offer insurance.

The tax credit is available to “small employers” with fewer than 25 full-time equivalent employees who pay an average wage of less than $50,000 a year, and pay at least half of employee health insurance premiums, according to the Internal Revenue Service (IRS).

For tax years 2010 through 2013, the maximum credit is 35 percent for small business employers and 25 percent for small tax-exempt employers such as charities. An enhanced version of the credit will be effective beginning January 1, 2014. (Additional information about the enhanced version will be added to IRS.gov as it becomes available. In general, on Jan. 1, 2014, the rate will increase to 50 percent and 35 percent, respectively.)

Surprisingly, the General Accounting Office (GAO) says fewer small employers claimed the Small Employer Health Insurance Tax Credit in tax year 2010 than were estimated to be eligible. While 170,300 small employers claimed it, estimates of the eligible pool by government agencies and small business advocacy groups ranged from 1.4 million to 4 million, according to a GAO report. The cost of credits claimed was $468 million.

One factor limiting the credit’s use, the report continues, is that most very small employers, 83 percent by one estimate, do not offer health insurance. According to employer representatives, tax preparers, and insurance brokers that GAO met with, the credit was not large enough to incentivize employers to begin offering insurance. Complex rules on full time employees and average wages also limited use. In addition, tax preparer groups GAO met with generally said the time needed to calculate the credit deterred claims. Options to address these factors, such as expanded eligibility requirements, have trade-offs, including less precise targeting of employers and higher costs to the Federal government.

Is That It?
The answer to that question is a simple no. With this massive plan about to take effect, employers may still have additional concerns. For more answers on the Affordable Care Act, look to the Frequently Asked Questions section found on the Department of Labor site. The mammoth health care plan requires 15 separate FAQ sections.http://www.dol.gov/ebsa/healthreform/#acaimplementationfaqs